2. Saving and Investing
Chapter 10
What research and planning can you do now to help secure your financial future?

3. Saving and Investing
Chapter 10
When you know about different investment opportunities and the financial planning process, you will be able to select a savings or investment program tailored to your goals.

4. speculative investment dividends retained earnings
Saving and Investing
Chapter 10
emergency fund
speculative investment
dividends
retained earnings
investment liquidity
equity capital
common stock
preferred stock
corporate bond
government bond
mutual fund
diversification
financial planner
tax-exempt income
tax-deferred income
capital gain
capital loss
prospectus

5. Saving and Investing
Chapter 10

6. Summarize ways to prepare for and survive a financial crisis.
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Outline your financial goals and evaluate how they align with your values.
Summarize ways to prepare for and survive a financial crisis.
Identify sources of money you can invest.
Describe the factors that affect your investment choices.

7. Establishing Your Financial Goals
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Establishing Your Financial Goals
Have Self-Discipline
Plan Carefully
Have an Emergency Fund
Be Specific
emergency fund
savings account that can be accessed quickly to pay for unexpected expenses or emergencies

8. Performing a Financial Checkup
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Performing a Financial Checkup
Preparing for a Financial Crisis
Establish a larger emergency fund.
Know what you owe.
Reduce spending.
Pay off credit cards.
Apply for a line of credit at your financial institution.
Notify creditors if you are unable to make a payment.
Monitor your investments and retirement accounts.

9. Getting the Money Needed to Start an Investment Program
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Getting the Money Needed to Start an Investment Program
Sources of Money to Invest
Pay Yourself First
Employer-Sponsored Retirement Plans
Elective Savings Programs
Special Savings Effort
Gifts, Inheritances, and Windfalls

10. Long-Term Investment Programs
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Long-Term Investment Programs

11. Making Investment Decisions
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Making Investment Decisions
A speculative investment could lead to a loss of the money you invest.
speculative investment
a high-risk investment that might earn a large profit in a short time

12. Making Investment Decisions
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Making Investment Decisions
Inflation Risk
Interest Rate Risk
Five Components of Risk
Business Failure Risk
Financial Market Risk
Global Investment Risk

13. Making Investment Decisions
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Making Investment Decisions
Sources of Investment Income
Savings accounts
Certificates of deposit (CDs)
U.S. Savings Bonds
U.S. Treasury bills
Corporate bonds
Preferred stocks
Mutual funds
Real estate
Commodities
Precious metals
Gems
Collectibles

14. Making Investment Decisions
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Making Investment Decisions
What are retained earnings?
retained earnings
profits that a company reinvests usually for expansion or to conduct research and development

15. Making Investment Decisions
Saving and Investing
Chapter 10
Section 1
Preparing for a Savings or Investment Program
Making Investment Decisions
What is investment liquidity?
investment liquidity
the ability to buy or sell an investment quickly without substantially reducing its value

16. Describe the two basic types of stock.
Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Describe the two basic types of stock.
Compare corporate bonds and government bonds.
Identify the main goal of real estate investing.
Explain the purpose of diversification.
List the steps involved in developing a personal investment plan.

17. Types of Investments What is equity capital? 10 Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Types of Investments
What is equity capital?
equity capital
money that a business gets from its owners in order to operate

18. Types of Investments Types of Stock 10 Saving and Investing Section 2
Chapter 10
Section 2
Savings and Investment Options
Types of Investments
Common Stock
Types of Stock
Preferred Stock
common stock
unit of ownership of a company entitling the stockholder to voting privileges
preferred stock
a type of stock that gives an owner the advantage of receiving cash dividends before common stockholders receive cash dividends

19. Types of Investments Types of Bonds 10 Saving and Investing Section 2
Chapter 10
Section 2
Savings and Investment Options
Types of Investments
Corporate Bond
Types of Bonds
Government Bond
corporate bond
a corporation’s written pledge to repay a specific amount of money, along with interest
government bond
written pledge of a government of a municipality to repay a specific sum of money with interest

20. Where Do Mutual Funds Invest?
Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Types of Investments
Where Do Mutual Funds Invest?
Stocks
Bonds
Other Securities
mutual fund
an investment in which investors pool their money to buy stocks, bonds, and other securities

21. Questions to Ask Before Investing in a Piece of Real Estate
Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Types of Investments
Questions to Ask Before Investing in a Piece of Real Estate
Why are the present owners selling?
Is the property in good condition?
What is the condition of other properties in the area?
Is there a chance the property will decrease in value?
Will you be able to find an interested buyer?
Can an interested buyer get the financing to buy the property?

22. Evaluating Investment Alternatives
Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Evaluating Investment Alternatives
Diversification in Investing Is Important
diversification
the process of spreading assets among several different types of investments to reduce risk

23. Developing a Personal Investment Plan
Saving and Investing
Chapter 10
Section 2
Savings and Investment Options
Developing a Personal Investment Plan

24. Explain the role of a financial planner.
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Explain the role of a financial planner.
Describe the actions you should take when managing your investments.
Identify sources of investment information.

25. Financial Planners 10 Saving and Investing Section 3
Chapter 10
Section 3
Reducing Risk and Sources of Information
Financial Planners
Factors to Consider When Deciding if You Need a Financial Planner
Your income level
Your willingness to make your own financial decisions.
financial planner
a specialist who is trained to offer specific financial help and advice

26. Financial Planners 10 Saving and Investing Section 3
Chapter 10
Section 3
Reducing Risk and Sources of Information
Financial Planners
Types of Financial Planners
Fee-Only Planners
Fee-Offset Planners
Fee-and-Commission Planners
Commission-Only Planners

27. Basic Services of a Good Financial Planner
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Financial Planners
Basic Services of a Good Financial Planner
Assess your current financial position
Offer a clearly written plan with recommendations
Discuss the plan with you and answer questions
Help you keep track of your progress
Guide you to other financial experts as needed

28. Financial Planners 10 Saving and Investing Section 3
Chapter 10
Section 3
Reducing Risk and Sources of Information
Financial Planners

29. Managing Your Investments
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Managing Your Investments
What Should You Do to Manage Your Investments?
Think About Tax Considerations
Evaluate Investments
Monitor Investments

30. Managing Your Investments
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Managing Your Investments
Three Categories of Investment Income:
Tax-Exempt Income
Tax-Deferred Income
Taxable Income
tax-exempt income
income that is not taxed
tax-deferred income
income that is taxed at a later date

31. Managing Your Investments
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Managing Your Investments
Taxable Income Includes
Interest Income
Rental Income
Dividends

32. Managing Your Investments
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Managing Your Investments
Capital Gain
Capital Loss
capital gain
profit from the sale of assets such as stocks, bonds, or real estate
capital loss
sale of an investment for less than its purchase price

33. Sources of Investment Information
Saving and Investing
Chapter 10
Section 3
Reducing Risk and Sources of Information
Sources of Investment Information
Finding Information About Investments
The Internet and Online Services
Newspapers and News Programs – The Wall Street Journal
Business and Government Publications – Barron’s, Forbes, Fortune, Harvard Business Review, Money – The Federal Reserve Bulletin
Corporate Reports – Prospectus
Statistical Averages
Investor Services – Standard & Poor’s Stock and Bond Guide, Morningstar Mutual Funds™
prospectus
document that discloses information about a company’s earnings, assets, and liabilities

34. Saving and Investing
Chapter 10

35. HIGHER ORDER THINKING QUESTIONS p
HIGHER ORDER THINKING QUESTIONS p : (see next slide for answers) 2. Explain How could owning real estate cause you to lose money every month? How could it make money for you every month? Pose If you have debts, such as credit cards or student loans, how can you put money in savings or investments? 4. Compare Describe a demographic group that may not prefer investment risk. Describe another demographic group that may be more comfortable with a greater degree of risk.

36. ANSWERS TO H. O. T. QUESTIONS 2, 3, & 4 2
ANSWERS TO H.O.T. QUESTIONS 2, 3, & You could lose money on a vacant lot or rental property that requires taxes and maintenance. You could make money on rental property where tenants pay rent each month. You pay the expenses and keep the difference as the profit PRIORITIZE: pay off credit cards and other high-interest loans before setting aside cash for investment. List all debt and interest rates on those debts to determine which should be paid first. After paying off debt research investment options Averse to risk: people who have had bad financial experiences (loss in stock market during early 2000s), people close to retirement, retirees. More comfortable with risk: high-income earners with firm financial base, young people with fewer financial responsibilities.

37. H. O. T. QUESTIONS (continued) (see next slide for answers) 6
H.O.T. QUESTIONS (continued) (see next slide for answers) 6. Assess Explain which level of the investment pyramid would be most appropriate for: gold, stock in a hydroelectric power company, and beachfront rental property Justify Assess and defend the importance of personal investment monitoring.

38. ANSWERS TO H. O. T. QUESTIONS #6 AND # 8 6
ANSWERS TO H.O.T. QUESTIONS #6 AND # (See Investment Pyramid, Slide 10, textbook pg. 323) Gold: Level 4, because gold is a speculative and therefore risky commodity. Power company: Level 2, because utility stocks are generally safe. Rental: Level 3, because real estate can be risky and should be reserved for experienced investors. 8. It is in your best interest to track your investments so you can adjust to changing circumstances. People think they are too busy and leave their investments to chance, or they think since they have a financial planner, they think they don’t have to do anything. WHO CARES MORE, you or your planner…?

39. H. O. T. QUESTIONS (continued) 11
H.O.T. QUESTIONS (continued) Tima earns $5,000 per month and is saving 8 percent of her earnings in an investment account on a monthly basis. After twelve months, she purchased stock with the saved money in her investment account for $24.00 per share. Six months later, she sold all of her shares for $26.45 per share. Tima is in the 15 percent tax bracket. How many shares of stock did Tima purchase? What was the capital gains tax on her sale of stock? 

40. ANSWER TO H.O.T. QUESTION 11: Savings and Tax on Capital Gains Monthly savings = $5,000 x .08 (8%) = $400 Annual savings = $400 x 12 = $4800 Shares purchased = $4,800/$24.00 = 200 shares Proceeds from sale = $26.45 x 200 shares = $5,290 Capital gains tax = ($5290 – 4800) x (15%) = x = $ (profit) tax bracket

41. End of